Greece’s economy underwent rapid growth in the post-World War II period, but it has remained one of the least developed in the European Union (EU). The country’s natural resources are limited, its industrialization process has been slow, and it has struggled with the balance of payments. Shipping, tourism, and remittances from expatriate workers (the last of which have been decreasing steadily) are the mainstays of the economy.

Although the Greek economy traditionally has been based on free enterprise, many sectors of the economy have come under direct or, through the banks, indirect government control. This process of establishing state ownership of the economy has been associated with both right and centre-left governments; however, in the first decade of the 21st century, the centre-right government—partly in response to pressure from the EU—showed an inclination for privatizing some sectors. Trade unions, which are fragmented and highly politicized, wield significant power only in the public sector. Measures taken since the late 1980s, however, have begun to decrease the degree of state control of economic activity. Following entry into the European Economic Community (later succeeded by the EU), Greece became a major beneficiary of the Common Agricultural Policy, which provided subsidies to the country’s generally inefficient agricultural sector and for projects to improve its infrastructure. Rates of productivity, however, have remained low for both agriculture and industry, and the development of the country’s economy has lagged behind that of its EU partners. Unemployment, which historically has been low, grew in the last decades of the 20th century as temporary migrant workers returned to Greece and as demand for immigrant labour has declined in other European countries. Some sectors of the economy, notably shipping and tourism, have shown considerable dynamism but have been highly vulnerable to international developments.

In late 2009 the Greek economy went into a tailspin. This economic and financial crisis had been partly precipitated by the global financial downturn that soured economies throughout the world in 2008–09 in the wake of the burst of the “housing bubble” in the United States in 2007, which left banks around the world awash in “toxic” debt. Beyond the difficulties tied to the international situation, however, it became clear that Greece had its own acute problems derived largely from excessive government borrowing and misleading accounting that had hidden the extent of the government’s extraordinary debt. Severe austerity measures were not enough to rescue the Greek economy and government, and in March and April of 2010 the EU and the International Monetary Fund (IMF)—fearing the collapse of the euro currency zone, which Greece had joined in 2001—stepped in with two huge aid packages that came loaded with new demands for austerity measures.

Agriculture, forestry, and fishing

Greece’s agricultural potential is hampered by poor soil, inadequate levels of precipitation, a landholding system that has served to increase the number of unproductive smallholdings, and population migration from the countryside to cities and towns. Less than one-third of the land area is cultivable, with the remainder consisting of pasture, scrub, and forest. Only in the plains of Thessalía, Makedonía, and Thráki is cultivation possible on a reasonably large scale. There corn (maize), wheat, barley, sugar beets, peaches, tomatoes, cotton (of which Greece is the only EU producer), and tobacco are grown.

Other crops grown in considerable quantities are olives (for olive oil), grapes, melons, potatoes, and oranges, all of which are exported to other EU countries. Since the last quarter of the 20th century, Greece also has been exporting hothouse-grown vegetables to northern Europe during the winter. Greek wine, including the resin-flavoured retsina, has been produced primarily for domestic consumption, but by the 1990s Greece was producing wines of higher quality for the world market. Sheep, goats, pigs, cattle, and chickens are raised for export and local consumption.

Although inefficient, Greek agriculture has benefited substantially from EU subsidies, and there are many signs of growing rural prosperity. In general, however, the importance of the agricultural sector to the economy is diminishing.

Forests, mostly state-owned, cover approximately one-fifth of the land area, but they are prone to major forest fires. Forest products make no significant contribution to the economy.

Greece’s extensive coastline and numerous islands have always supported intensive fishing activity. However, overfishing and the failure to conserve fish stocks properly, a problem throughout the Mediterranean, have reduced the contribution of fishing to the economy.

Resources and power

Greece has few natural resources. Its only substantial mineral deposits are of nonferrous metals, notably bauxite. The country also has small deposits of silver ore and marble, which are mined. Fossil fuels, with the exception of lignite, are in short supply: there are no deposits of bituminous coal, and oil production, based on the Prinos field near the island of Thásos, is limited. After the Thásos discovery, a dispute developed in the 1970s between Greece and Turkey over the delineation of the two countries’ respective continental shelves and has remained unresolved. At the start of the 21st century, about nine-tenths of Greece’s electrical power needs were supplied by fossil fuels (primarily by lignite-fueled power stations), and nearly one-tenth by hydroelectric power, with a still considerably smaller slice provided by nuclear energy. From the late 1990s the country began developing solar and wind power.

Manufacturing

The manufacturing sector in Greece is weak. An established tradition exists only for the production of textiles, processed foods, and cement. One of the world’s largest cement factories is located in Vólos. In the past, private investment was oriented much more toward real estate than toward industry, and concrete apartment blocks proliferated throughout the country. In the 1960s and ’70s Greek shipowners took advantage of an investment regime that benefited from foreign capital by investing in such sectors as oil refining and shipbuilding. Shipping continues to be a key industrial sector—the merchant fleet being one of the largest in the world—though many of Greece’s ships are older than those of other leading countries. In the 1970s many ships that had hitherto registered under flags of convenience returned to the Greek flag; only a small proportion remains under foreign registry. Greek ships, which are predominantly bulk carriers, are extremely vulnerable to downturns in international economic activity, as they are principally engaged in carrying cargoes between developing countries. In the early 21st century about one-fifth of the labour force was employed in manufacturing and construction.

Finance

The central bank is the Bank of Greece, which issued the drachma, the national currency, until 2001, when Greece adopted the euro as its sole currency. Greece has been a member of the EU since 1981. A significant number of the country’s commercial banks are state-controlled. The state also exercises considerable control over the insurance sector.

There is a stock exchange in Athens, but, for many Greeks, real estate, foreign currency, gold, and jewelry have proved to be more attractive investments than securities and bonds. Although Greece has a pension and social insurance system of considerable complexity, many Greeks have opposed changes to it. By the late 1990s it had become easier for Greeks to obtain their pensions and get medical care. The main social security fund, the Social Insurance Institute (IKA), is prone to recurrent funding crises.

Trade

At the beginning of the 21st century, about two-fifths of Greece’s trade was with the other member countries of the EU, and its main trading partners were Germany and Italy. The principal exports included food (especially fruit and nuts), clothing and apparel, machinery, and refined petroleum and petroleum-based products. Machinery and transportation equipment, chemicals and chemical products, foodstuffs, ships and boats, and crude petroleum are the country’s main imports.

The emergence of a consumer society has created a huge demand for imported consumer goods—in particular, automobiles—which has had negative consequences for the country’s balance of trade. In the early 21st century, the deficit in the balance of payments was offset by the borrowing that would eventually be responsible for the country’s economic collapse, as well as by limited foreign investment, and, to a lesser extent, by remittances from emigrants.

Services

Services have become the dominant sector of Greece’s economy, contributing about two-thirds of the gross domestic product (GDP) and employing about the same proportion of the workforce by the early 2000s. All parts of the sector have grown, with the rise in tourism being especially importantGovernment services were significantly reduced, however, as part of the austerity measures undertaken in response to the economic crisis at the end of the decade.

A host of World Heritage sites are found in Greece, including the Acropolis in Athens (designated a World Heritage site in 1987), the medieval city of Rhodes (1988), and the archaeological site of Olympia (1989), to name but a few. Starting in the 1960s, the number of tourists, notably those from European countries, increased significantly, although Greece faced increasing competition from countries such as Portugal and Turkey. Improved road transport and infrastructure and the creation of a network of truck- and car-carrying ferries linking mainland Greece to the numerous islands and to Italy were instrumental to this growth. By the beginning of the 21st century, some 14 million visitors were arriving annually, many of them from the United Kingdom and Germany, and there was a new emphasis on attracting tourists from China.

Labour and taxation

In the mid-1970s, with the return of parliamentary democracy, trade unions became mobilized. For the next decade and a half there was a period of increased strike activity, characterized by greater militancy and expanding membership in organized labour. By the early 1990s, however, as the Greek economy became more stable and less industrial, trade union membership and bargaining power were diminished. Though not officially recognized, there are trade union factions belonging to each of the major political parties. Overall, however, union labour in Greece is primarily represented by the General Confederation of Greek Workers (Geniki Synomospondia Ergaton Ellados; GSEE). The Civil Servants’ Confederation (Anotati Diikisis Enoseon Dimosion Ypallilon; ADEDY) is the next most important labour organization. Whether they belong to unions or not, Greeks in a wide variety of occupations—from physicians to public transportation workers—have shown a willingness to undertake wildcat strikes. There was widespread union opposition to the austerity measures (which included reductions in benefits and pensions) introduced by the government in response to the economic crisis that began in 2009.

Greece instituted a value-added tax (VAT) in 1987. In the first decade of the 21st century, the government began to reduce the corporate income tax rate. Individual income tax is progressive, with rates as high as 40 45 percent in the middle beginning of the first second decade of the 21st century.

Transportation and telecommunications

Only since the last half of the 20th century have all the country’s villages become accessible to wheeled traffic and linked to the national electricity grid. There are no navigable rivers and only one waterway, the Korinthiakós (Corinth) Canal, which divides the Pelopónnisos from mainland Greece. Although the canal significantly shortens the sea route from the Italian ports to Piraeus (the port of Athens), it has never fulfilled the economic expectations of its builders, because of its shallow draft and narrow width. There are also major ports at Patras and Thessaloníki.

Railway construction began in the 1880s and, given the rugged terrain of the country, involved some difficult feats of engineering. Today the extensive railway system includes a narrow-gauge railway network in the Pelopónnisos. A program to modernize the railway system with the aid of EU funding commenced in the mid-1990s. Public transport in the Athens metropolitan area is heavily dependent on an often overcrowded and sometimes unreliable bus network. Much of Athens is serviced by the Metro; construction of that subway system began in the 1990s but proceeded relatively slowly, as the digging unearthed a treasure trove of antiquities. More subway lines are planned for the Metro, which is supplemented by a small suburban railroad network linking the northern suburb of Kifisiá with the port of Piraeus.

The extensive nationwide bus-and-ferry network has been augmented since the 1960s by the development of a flight network linking Athens with a few dozen domestic airports. The country’s main airports are in suburban Athens and Makedonía, near Thessaloníki. International airports are found also at Alexandroúpoli (Alexandroúpolis) in Thráki and Andravída in the northwestern Pelopónnisos, while others service the country’s important tourist destinations on the islands. For several decades Olympic Airlines was owned by the government and had a virtual monopoly on air travel within Greece, but in 2009 it was acquired by a private investment group. Meanwhile, several small, privately owned airlines began offering limited service, primarily within Greece.

In the early 21st century the saturation rate of cellular phone use was extremely high, with almost as many subscriptions as there were citizens.